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HOUSTON--(BUSINESS WIRE)--
According to the 2017 Debit Issuer Study, commissioned by PULSE,
one of the nation’s leading debit/ATM networks, U.S. financial
institutions substantially increased issuance of chip debit cards in
2016 and experienced reduced fraud losses. Since the fraud liability
shift for most debit transactions took effect in 2015, an estimated 80
percent of U.S. debit cards have been converted to chip cards. The study
also found that fraud loss rates dropped by approximately 28 percent in
2016 compared to 2015 levels.

Nonetheless, the 12th annual Debit Issuer Study confirmed
that fraud continues to challenge issuers. U.S. financial institutions
lost an estimated $900 million to debit card fraud in 2016.

“The financial services industry has taken a number of measures that
likely impacted the reduction in fraud losses for debit card issuers,”
said Jim Lerdal, Vice President of Fraud and Risk Management for PULSE.
“Among them are the conversion to chip debit cards, greater use of
tokenization in mobile commerce and continued investment in
fraud-mitigation solutions.”

But reducing card fraud is not a simple prospect.

“The more financial institutions tighten fraud-tolerance limits, the
more they risk negatively impacting the cardholder experience,” said
Lerdal. “It is a balancing act because declining potentially fraudulent
transactions could lead to ‘false positive’ fraud identification, which
can frustrate account holders and potentially drive them to other
methods of payment.”

Mobile wallets see increased enrollment, but low usage

The study also found enrollment of debit cards into Apple Pay increased
80 percent in 2016. Key findings include:

Three out of four issuers now support debit cards being loaded into at
least one mobile wallet.

Enrollment among consumers also has increased, with Apple Pay
remaining the most popular mobile wallet of the big three “Pays,”
which include Android Pay and Samsung Pay.

Despite this momentum, usage of debit cards in mobile wallets remains
low. Combined, Apple Pay, Android Pay and Samsung Pay account for only
about one-quarter of 1 percent of U.S. debit transactions.

Continued growth of debit

Debit card usage grew in 2016, driven by an increase in both the overall
card base and transactions per active card. Study findings include:

The total number of debit transactions continued to increase, rising
an average of 7 percent year-over-year in 2016 for the issuers in the
study.

The number of debit transactions per active consumer card reached a
record high of 23.6 transactions per month, which represents a 6
percent increase over results report in the 2016 study.

The number of debit cards increased 1 percent year-over-year.

“This year’s study confirms that debit remains a core part of the
expanding payments landscape, even as new forms of payment emerge,” said
Steve Sievert, Executive Vice President of Marketing and Brand
Communications for PULSE. “The average consumer now uses their debit
card 39 percent more often than they did in 2010, and for more
transactions of lower value, indicating that debit is a fundamental
financial tool for their everyday lives.”

Chip card growth likely to slow as transition plateaus

Issuers have put chip debit cards in the hands of consumers at a faster
pace than anticipated in last year’s study. “Chip-on-chip” transactions
– those conducted with chip-enabled cards at chip-enabled terminals –
amounted to 30 percent of all debit transactions in January 2017, a 650
percent year-over-year increase.

“The growth of chip-on-chip transactions is likely to slow as the card
base migration concludes,” said Tony Hayes, a Partner at Oliver Wyman
who co-led the study. “In addition, many transactions are not
chip-eligible, such as online purchases and fuel dispenser transactions.”

About the Study

The 2017 Debit Issuer Study is the 12th installment in
the study series, commissioned by PULSE and conducted by Oliver Wyman,
an independent management consulting firm. The study provides an
objective fact base on debit card issuer performance and financial
institutions’ outlook for the debit card business. Fifty financial
institutions – including large banks, credit unions and community banks
– participated in the study. Collectively, the participants issue
approximately 134 million debit cards. The sample is representative of
the U.S. debit market in terms of institution type, geography and debit
network participation.

About PULSE

PULSE, a Discover Financial Services (NYSE: DFS) company, is one of the
nation’s leading debit/ATM networks. Financial institutions, merchants,
processors and ATM deployers across the United States and around the
world depend on PULSE’s comprehensive suite of products and services and
its commitment to providing exceptional client service, flexibility,
security and superior economics. PULSE also is a resource for debit
education, research and knowledge drawn from more than three decades of
industry experience. For more information, visit pulsenetwork.com.